2005 (7) TMI 552 - AT - Central Excise

Summary

Issues: Penalty imposition under Rule 173Q(1)(a) and (d) of the Central Excise Rules, 1944 on traders for connivance with another party in evading Central Excise duty.

Detailed Analysis:

1. Background and Allegations:
The appeal was filed against an Order-in-Original imposing a penalty of Rs. 3,00,000 on the appellants for alleged connivance with a party evading Central Excise duty on processed fabrics. The investigation revealed evasion by M/s. Ashok Fashions Ltd., prompting a search where records were seized.

2. Appellants' Position:
The appellants, M/s. Rahul Enterprises, argued that there was no evidence of conspiracy or abatement on their part. They contended that as mere traders, Rule 173Q should not apply to them, and the penalty imposition was unjustified.

3. Imposition of Penalty:
The penalty was imposed based on a statement by Shri Ramesh Kumar Surana indicating that the appellants got fabrics processed from the evading party at a specific rate, paid in cash, and received goods without excise invoices.

4. Judgment and Analysis:
Upon review, it was noted that the Show Cause Notice lacked specific attributions to the appellants, with no indication of their knowledge or involvement in the evasion scheme. The penalty under Rule 173Q(1)(a) and (d) was deemed inapplicable to traders and buyers, focusing on suppliers and dealers. Consequently, the impugned order was deemed unsustainable, leading to the allowance of the appeal.

This detailed analysis encapsulates the key aspects of the judgment, highlighting the legal arguments, evidence, and the rationale behind the decision to overturn the penalty imposition on the appellants.